"Shadow inventory" mires Missoula real estate market

The median sale price of a Missoula home this year is $21,000 less than it was in 2011, and home values will likely continue to slide because of a backlog of bargain-priced foreclosures that have yet to be listed for sale, a glut of properties real estate professionals call "shadow inventory."

"I truly believe that we have not bottomed out," says Darwin Ernst, Government Relations Committee chair of the Montana Chapter of the Appraisal Institute. "I'm still seeing declining property values throughout [the market]. Whether it's on the high end or the low end, they're still coming down."

In 2011, there were 188 foreclosures in Missoula County. That's two fewer than in 2010. There were 39 in the first quarter of 2012.

Based on trustee sales, commercial property information, multiple listing services data compiled by real estate agents and brokers and other sources, Ernst estimates that 16 percent of the residential foreclosures that occurred in Missoula last year have yet to come on the market. The appraiser believes that roughly 20 percent of all homes sold in the Garden City this year will be bank or lender owned.

Missoula isn't alone with its backlog. Real estate data aggregator CoreLogic reported that there were 1.6 million residential properties in the nation's shadow inventory in January.

The picture is not all bleak, says Missoula Organization of Realtors CEO Ruth Link. She points out that the sales volume in Missoula is holding steady. Between Jan. 1 and Feb. 29 of this year, 96 homes were sold in the Missoula urban area. That's up from 83 during the same period in 2011. Link says low interest rates are helping to sustain the local market. "We're still really healthy."

Missoula Realtor Brint Wahlberg also sees a silver lining. "Housing affordability was way out of whack," he says. "We're turning back to an affordable level."